SHARE   |  

[Webinar] Tax Insights: Ohio

2013-09-20 11:00:00

This webinar provides a high level overview of the payroll tax agencies in the Buckeye State – Ohio.Participants will learn interesting facts about the Ohio State Taxing authorities and challenges that employers may face.

In addition, learn what the state would like taxpayers to know and some recent accomplishments between ADP and the agencies.

Agenda:

  • Introduction
  • High-Level State Overview
  • Current Opportunities
  • What Ohio Wants You to Know
  • Recent Accomplishments

felgarVeronica Felgar
Government Relations Analyst at ADP 
Veronica Felgar is a government relations analyst responsible for ADP’s compliance and our relationship with the State of Ohio. She’s been with ADP for close to 15 years, with experience in garnishment processing and tax filing to government agencies.


Hello. My name is Karen Barum, Marketing Manager here at ADP. Thank you for joining us for our webinar. Before I introduce today’s presenter, I’ll cover a few housekeeping items. This is one of a number of complementary webinars that ADP offers to tax, finance, and HR professionals during the year. Today’s webinar will last for 30 minutes and is not eligible for CPE or RCH credits.

I’d like to share a few facts about ADP. ADP provides services to over 600,000 clients worldwide. We pay one out of every six employees in the United States, and we’re one of only four companies with a AAA rating by Standard & Poor and Moody’s. We’re very proud of these facts and the others we’re sharing with you on this slide.

Allow me to introduce our presenter for today. Veronica Felgar is a government relations analyst responsible for ADP’s compliance and our relationship with the State of Ohio. She’s been with ADP for close to 15 years, with experience in garnishment processing and tax filing to government agencies. I’ll now turn our presentation over to Veronica.

Veronica Felgar: Thank you, Karen. Hello, everyone. I’m happy to be with you today to share about the Buckeye State, Ohio agencies. Let me begin by sharing our agenda. This webinar will cover a high-level overview, which will include some interesting facts about the Ohio State Taxing Authority, and we’ll also talk about challenges employers may face. We’ll guide you through what the State would like all of our taxpayers to know and also some recent accomplishments.

Let’s get started with the information on Ohio. Two agencies are currently responsible for collecting State payroll taxes from Ohio employers. The Ohio Department of Taxation, also known as ODT, is responsible for collecting withholding taxes on behalf of the Treasurer of the State, as well as Ohio school district income taxes for the entire state. Through this presentation, we will use ODT when referring to the Ohio Department of Taxation.

The unemployment insurance tax is collected by the Department of Job and Family Services, or JFS. Here’s an interesting fact. Ohio is the 34th-largest state, but the seventh most populous state in the US. That’s a lot of employees, a lot of wage detail and W-2’s. I hope you find the following details will assist you to file all those taxes timely and accurately.

To get started as an employer in the state of Ohio, an employer must register for an ODT account within 15 days of the date that the liability began and must include their unique ODT number in all correspondence directed to the agency. Employers can obtain this number online at the link shown on the slide. In most cases, an account number can be issued within minutes. You will find that online is the most effective way to register.

Employers can also mail a paper registration. The registration form is IT-1, or employers can call to register. These two methods can take a little longer to obtain an ODT account number.

The Ohio Business Gateway offers electronic registration and filing for other tax types, including commercial activity tax, or CAT, sales tax, worker’s compensation, and municipal income taxes for nearly 500 cities and villages. According to the Ohio Business Gateway recorded message from Ohio Governor Kasich, employers can also conduct more than 50 transactions on their gateway. Highlights of the site include business expansion assistance, permits and licenses and finding employees. The Ohio Business Gateway has been recognized nationally for its one-stop site for employers. It sounds to me like a site to save as a favorite.

Here we have a deposit schedule at a quick glance. July 1st through the 30th is referred to as a look-back period. Liability during this period determines the employer’s deposit frequency for the entire upcoming calendar year. If you’re an employer with a withholding tax amount of less than $2,000 during this period, you will be assigned a quarterly deposit schedule. Your payments are due the last day of the month following the end of quarter.

For withholding amounts of more than $2,000 but less than $84,000, your deposit schedule will be monthly. Those payments are due 15 days following the end of each month.

Semi-weekly, or partial weekly periods, are assigned to employers whose actual or required payments exceed $84,000. This excludes the school district income tax. When this is the assigned deposit schedule, Ohio employers must make electronic payments. Payment dates are due Wednesday and Friday unless it’s a holiday; then it would be the next business day.

Regardless of the deposit schedule assigned, any time the withholding tax amount exceeds a $100,000 threshold, those payments are due electronically the next business day.

Employers can expect to receive a yearly notice informing them of their deposit schedule. These notices are mailed during the November timeframe. So it goes without saying that during this timeframe, it is important that you look for those notices and also to make sure that you have your updated address with the ODT.

As mentioned previously, when deposit amounts are more than $84,000 or exceed $100,000, those funds are due via Ohio electronic funds transfer, or EFT. In order to make electronic payments, you must register with the State of Ohio and use your assigned ODT number when making your electronic payment. Electronic payments can be completed on the Ohio Business Gateway.

Did you know that if an employer is required to make the electronic payment, that fails to pay electronically as assigned, the employer may assess a penalty of up to 5% of the amount of the tax due? Yes, that is correct, and there is also a maximum penalty of $5,000.

Moving on to forms, employers remitting payments on a monthly or quarterly schedule via TAC must remit Form IT-501. Checks should be made payable to the Ohio Treasurer of State and remit to the Ohio Department of Taxation. If your assigned schedule is semi-weekly, you’re required to file a quarterly reconciliation form. Corrections can be made on your regular filing forms and annually, those corrections can be made using IT-941X. All employers are required to file an annual form as listed on the slide.

W-2’s and 1099Rs are filed annually, and withholding amounts are included on the form IT-3. When corrections are required, employers must send corrected files on the W-2C. And we’ll go into some detail about things to remember when filing the W-2Cs in a little bit.

Electronic filing–now, only employers who are completely registered with ODT and using a uniquely assigned ODT number can register on the Ohio Business Gateway. Once registered on the Gateway, employers can file electronically for withholding tax, unemployment insurance, and municipal income taxes. Employers that file 250 or more W-2 forms to the Social Security Administration or federal government, and that’s Copy A, must file W-2’s electronically using the federal file format, ES-W2. And we’ve attached a link to these specifications for your convenience.

Here’s an example of what that means. If you have 250 or more employees across all of the states, and therefore you’re sending 250 or more W-2’s to the Social Security Administration, even if you only have three employees in Ohio, you still must file your Ohio W-2’s electronically to the ODT.

And we have gone over the filing and deposit requirements and what forms to use. Adhering to these guidelines will prevent penalty and interest from being assessed. Penalties can add up quickly, so we want to mitigate whenever it’s possible. For instance, if you fail to pay your taxes on time, the penalty is 50% of the tax due. There are separate penalties for failure to file. That penalty is the greater of $50 per month up to $500, or 5% per month, up to 50% of the tax due. And keep in mind that interest accrues on unpaid tax. For calendar year 2013, that rate is 3%. Should you ever need assistance with calculating interest, we have included a link to the State’s interest calculator. And now interest is charged in addition to any penalty.

Moving on to credits and refunds, there are no specific forms required when requesting a credit or a refund. Our contacts in ODT say to use the reconciliation form, IT-941, or the amended form, IT-941X, to report your overpayment. It’s best if credits are applies to liability within the same calendar year. Please also note that employers can use Form WTAR, the Application for Income Tax Withholding Refund, if the employer is seeking a refund of an overpayment resulting from an erroneous bill or an assessment.

We’re now going to shift gears to go over the Department of Job and Family Services, or JFS. This agency collects the unemployment insurance taxes paid by Ohio employers. To register to pay unemployment insurance tax, employers can register online. When employers register online, an account number is assigned immediately. Employers can also register with Form JFS-20100. That’s the Report to Determine Liability. Mailing the registration form can take approximately four to six weeks for an account number to be assigned. And keep in mind that during peak periods, such as the quarter processing, it can take longer to process those applications and assign a JPF account number.

Each employer is required to pay unemployment taxes on the first $9,000 in wages for each employee. So, for example, if you have an employee who has two different employers, each employer must pay unemployment insurance on the first $9,000 of the calendar year. Payments can be made via check on the last day of April, July, October, and January. As long as the payments and reports are postmarked on or before these due dates, the returns and payments are considered timely. When the due date falls on a Saturday, Sunday, or holiday, the report must be postmarked by the next business day. ACH-7 is available through the Ohio Business Gateway or through ERIC. ERIC stands for Employer Resource Information Center.

Employers are required to file a complete quarterly tax return each quarter. For employers with less than 200 employees, you may file by paper. The report is Form JFS-20125.

The report consists of two sections, the wage detail and the quarterly summary. Most employers must file both the wage detail and the quarterly summary. Reimbursing employers or nonprofit and public employers must file the wage detail section, but they can use a different quarterly summary report called the unemployment compensation, which is the quarterly tax return Form JFS-20126.

Please note, if you had no employees and paid no wages during a quarter, a report must still be filed by the due dates previously mentioned. JFS has made it easy for these employers. The zero wage, zero employment report can be filed through the UC Tax Interactive Voice Response, or IVR system, by calling 1-866-448-2829.

Now, employers with more than 200 employees should report wage information electronically. There are two methods to accomplish this. It’s highly recommended that employers file online at the link referenced here, which will connect you to the Ohio ERIC system. This is a secure electronic filing system. Or the reports can be filed on magnetic media. You will need to format your file to match the specifications, which are a standard for unemployment insurance agencies called ICESA. The link to that format is provided on this slide. And larger employers can also file via file transfer protocol, or FTP.

Now, a single unemployment insurance penalty, also called a forfeit, is assessed for failing to submit a quarterly contribution and wage report when it is due. The penalty or forfeit will amount to 25% of the total wages reported. The maximum penalty for failure to file a quarterly report when it is due is $50, and a maximum of $1,000. In addition to the penalty, there’s also interest for late payments. The interest has an annual rate of 14%.

Now, if you happen to accidentally overpay your unemployment insurance, the credit can be applied to future unemployment liability. Employers who have a credit can call JFS to request a refund when the amount is under $100. If the credit amount is over $100, you can send an email to Request a Refund, or you can send a letter on company letterhead with the overpaid JFS account number. You can also include your Federal ID Number, or FEIN, for the quarters or periods that were overpaid, and the amount that you wish to have refunded.

Part of the partnership ADP has with both ODT and JFS involves validation of our clients’ information to ensure accuracy. Specifically, with the Department of Job and Family Services, we exchange rate validations for our clients at least two times per quarter. In addition to this exchange, we’re privileged to have access to each new year’s rate very early to ensure proper calculations at the very start of the new year so that our clients can begin forecasting their next year’s tax liabilities as soon as possible.

Let’s cover a few items that the State wants employers to know. An important form that must be retained by every employer is Form IT-4, the employee’s withholding exemption certificate. Every employee must file this form with their employer. If you have provided this form to your employee and he or she has not returned the form prior to wages being paid, you must withhold tax from the employee’s compensation with the zero exemption. The same is true if the employee claims more than nine exemptions for which the employee cannot provide Social Security numbers. The employee must then withhold with the zero exemption.

Every school district has a four-digit code that must be used for that employee’s tax, and school districts can have different rates to withhold. Ohio has 184 school districts. Your employee should complete a new form, IT-4, when the form they previously filed is no longer correct, for instance, if the employee were to move to a new school district. To determine the appropriate school district rate to withhold, the ODT hosts a site where you can look up rates by your employee’s address, zip code, or even latitude and longitude coordinates. You can also download a list of all the school district rates on this site.

Ohio also wants their taxpayers to know that withholding rates were reduced effective with payroll ending September 1, 2013. The rates were expected to be reduced again in 2014 by 0.5%, and in 2015, by 1%. This is possible with the passing of House Bill 59. ODT has very detailed information on their website related to this bill.

ODT is also looking to implement future enhancements and automation, including creating an electronic filing to accompany each deposit. The long-term goal is to also include the school district tax detail in the electronic file and to collect all tax payments electronically. ODT is currently building and testing a new electronic filing system.

And just like employees are required to complete a new IT-4 when it no longer has current information, employers should also include and update the State of Ohio when they have a change in address or status. So when you’re closing your business, or if you’re an out-of-state business and will no longer have wages paid in Ohio, employers should close their account by completing Change of Ohio Employer Name, Address or Status, which is Form IT-WHC. The link is provided on the slide.

Ohio, once a business is finalized, they must file final W-2’s within 60 days from when the business was finalized. Ohio’s website does list out the payment schedule each year. Right now, you can see 2012 and 2013. To find the schedule, you can go to the link provided above. Under Forms, enter the tax type–employer withholding tax, as shown on the slide–and in the tax year, you can enter the year that you’re looking for. Here we enter 2013.

If you scroll down to the bottom, there you will see Employer’s Withholding Tax Due Payment Schedule. It’s important to know exactly when payments are due, as they could be moved due to a holiday coming up. The 2014 schedule is not yet available. The schedule is posted on the Web near the end of the year in November or December around the same time that ODT posts the revised instructions and school district rates.

Let’s switch gears to unemployment tax. For 2012, Ohio has a FUTA credit reduction state. When state unemployment insurance funds are depleted, as occurred in many states in recent years, states draw from a designated federal loan account. If such loans are not repaid within two consecutive years, part of the 5.4% FUTA tax credit is reduced, thereby increasing the effective FUTA rate in those states.

When this credit reduction applies, the FUTA tax typically increases 5.3%, or $21 per worker. This is payable in January of the following calendar year with IRS Form 941. This credit is further reduced annually by 3% until the loans are repaid. Ohio was impacted for the second year in a row in 2012. The 2012 credit reduction was 6%. Therefore, the FUTA rate is 1.2%. It is possible that Ohio employers will lose another 3% FUTA credit in 2013, for a total of 9%, increasing the FUTA rate to 1.9% for Ohio employers.

Speaking of rates, JFS is projecting to mail out their 2014 unemployment insurance rate notices around November 27 of this year, 2013. For those employers that are using the agency’s online ERIC system that we previously discussed, you actually can view your rate notice approximately two weeks before they’re mailed. They’re helping you to stay one step ahead of the game.

Now let’s talk about current opportunities. From my recent conversations with the Department of Taxation, we would like to share the following opportunities. Employers should be aware of the following when they’re filing the W-2C and expecting a refund. If the employee has already filed their income tax and received a refund, the agency cannot also refund the employer. For this reason, it is important to provide employees with the correct W-2 filings that display the actual amount that is withheld from their pay.

It is also important that when employers are submitting filings, that the forms are completely filled out. Incomplete forms are time-consuming for all. Ohio will not be able to process an incomplete form, and this may require direct contact with you, the employer, in order to collect all the necessary information to process the filing.

Part of having a complete filing is ensuring that correct year-to-date figures for new clients are filed on the annual form. This would especially apply if information changes midyear. Whether it’s adding another location or going from in-house payroll processing to outsourcing, the annual forms must also be complete in all the activity for the total of that tax year.

Amendments to filings are topics of conversations I’ve had with JFS. Their Amendment Form JFS-20129 is very robust, with a variety of reasons for amending. The form lists the amendment reason with its corresponding two-number code. These codes should be used when requesting to amend the unemployment compensation quarterly return. These employers are encouraged to file online, and you can file online at unemployment.ohio.gov.

Long term, Ohio JFS is pursuing the automation of original and amended reports for all employers. Although an exact date is not known at this time, this is a high priority for this agency.

Now for a few accomplishments between ADP and each of the Ohio agencies. ADP implemented an electronic solution beginning with first quarter 2013, electronic filing. This secure filing went off without a hitch and has been in effect since the first quarter. We were able to partner with this agency to ensure seamless processing. This agency agreed to not implement strict edits on ADP’s electronic filing, and as a result, there were no rejected electronic files for our clients. We experienced 100% file acceptance.

Our partnership and relationship with Ohio includes regular visits to both ODT and JFS offices, as well as frequent discussions and conference calls. Both offices exchange data with ADP to ensure accuracy in client data at time of filing.

Another accomplishment is a Memorandum of Understanding that ODT has with ADP that allows our organizations to communicate openly as trusted partners for the benefit of our mutual clients.

Now, ADP recently built an online community for payroll and HR professionals called the bridge, where you can ask questions, share knowledge, make connections, and learn from industry experts and their peers on a broad range of human capital management topics. The bridge can be found at www.thebridge.adp.com. Let me say that once again, www.thebridge.adp.com. You can log in and see current requirements and changes for Ohio as well as other states. We hope that you have a chance to visit our new community and that you have enjoyed this presentation.

Karen Barum: Thank you so much, Veronica. A couple more additional free resources I’d like to mention today that you may find valuable are the ADP Compliance Insights blog. Here’s another location where tax, compliance, and financial professionals discuss legislative and other factors that could affect their business. You can read and subscribe to the ADP Compliance Insights blog by visiting www.adpcomplianceinsights.com.

For additional information on any of the ADP products or services referenced during our webinars, please call 855-ADP4CFO, or visit ADP.com.

That concludes our program for today. We thank you very much again for joining us. Have a wonderful day.

First Name:
Last Name:
Email:
Phone:
Company:
Zip:
Number of Employees:
ADP Client
Prospect
Client
 


1-855-864-1712

Sign Up for
Email Updates

featured webinar